Lifeway Foods' 2011 net sales hit $70.4 million

Lifeway Foods' 2011 net sales hit $70.4 million

Kefir company expects first quarter 2012 net sales to increase approximately 14 percent to $21 million. 

Lifeway Foods, Inc., (Nasdaq: LWAY), a leading supplier of cultured dairy products known as kefir and organic kefir, announced results for the fourth quarter and full year ended December 31, 2011.

Fourth Quarter Results
Fourth quarter of 2011 gross sales increased 16% to $18.7 million compared to $16.1 million for the fourth quarter of 2010. This increase is primarily attributable to increased sales and awareness of the Company's flagship line, Kefir, as well as ProBugs® Organic Kefir for kids and BioKefir™. In addition, Lifeway's Frozen Kefir line, which was launched in April 2011, contributed approximately $0.4 million to sales during the fourth quarter of 2011.

Fourth quarter total consolidated net sales increased 14% to $16.8 million from $14.7 million in the fourth quarter of 2010. Net sales are recorded as gross sales less promotional activities such as slotting fees paid, couponing, spoilage and promotional allowances as well as early payment terms given to customers. The total allowance for promotions and discounts in the fourth quarter of 2011 was approximately $2.0 million or 10.5% of gross sales, compared to $1.4 million or 8.6% of gross sales in the same period last year. This allowance increase of $0.5 million year-over-year is due to an adjustment made during the fourth quarter of 2011 associated with write-offs of accounts receivable balances outstanding as of December 31, 2011 for known discounts.

Gross profit for the fourth quarter of 2011 increased 27% to $4.1 million, compared to $3.8 million in the fourth quarter of the prior year. The Company's gross profit margin increased to 23% in the fourth quarter versus 20% in the fourth quarter of 2010. The increase in gross profit margin is primarily due to the lower cost of transportation and other petroleum-based production supplies, partially offset by the increase in the price of conventional and organic milk, the Company's largest raw material. The total cost of milk was approximately 20% higher during the fourth quarter of 2011 when compared to the same period in 2010.

Operating expenses as a percentage of net sales were approximately 25% during the fourth quarter of 2011, compared to approximately 24% during the same period in 2010. This increase was primarily attributable to increased selling expenses as compared to the same period in 2010. Selling related expenses increased by $0.4 million to $2.4 million during the fourth quarter of 2011 approximately equal to the same period in 2010. This increase is directly attributable to increases in marketing and advertising of the Company's flagship line, Kefir, as well as ProBugs Organic Kefir for kids, BioKefir and Lifeway's Frozen Kefir.

The company reported a loss in operations of $0.5 million during the fourth quarter of 2011, an improvement of $79,343 from $0.5 million during the same period in 2010.

Income tax benefit was $0.1 million for the fourth quarter approximately equal to the same period in 2010.

Total net loss was $0.4 million or a loss of $0.02 per diluted share for the three-month period ended December 31, 2011 compared to a net loss of $0.2 million or a loss of $0.01 per diluted share in the same period in 2010.

"We are very pleased with our 2011 financial results and are excited to continue this strong momentum into 2012," said Julie Smolyansky, CEO of Lifeway Foods, Inc. "In 2012 we will begin limited distribution of our Kefir products in Target, including 189 PFresh and 249 SuperTarget stores. In addition, our frozen kefir continues to gain momentum and we expect it to produce approximately $0.6 million in sales in the first quarter of 2012."

Mrs. Smolyansky continued, "We believe our product offerings are extremely on-trend as consumers continue to demand healthy and delicious food products. Going forward, we are very confident in our future growth. We believe the combination of increased sales and lower milk prices will help us generate approximately $100 million in gross sales and record profitability in 2012."

2011 Year End Results
Total consolidated gross sales increased 21% or $13.6 million to approximately $77.1 million during the twelve-month period ended December 31, 2011 from $63.5 during the same twelve-month period in 2010. This increase is primarily attributable to increased sales and awareness of the Company's flagship line, Kefir, as well as ProBugs® Organic Kefir for kids and BioKefir™. In addition, Lifeway's Frozen Kefir line, which was launched in April 2011, contributed approximately $0.7 million to sales during the twelve month period ended December 31, 2011.

Total consolidated net sales increased 20% or $11.9 million to $70.4 million during the twelve-month period ended December 31, 2011 from $58.5 million during the same twelve month period in 2010. Net sales are recorded as gross sales less promotional activities such as slotting fees paid, couponing, spoilage and promotional allowances as well as early payment terms given to customers.

Gross profit for the first twelve months of 2011 increased 32% to $22.5 million, compared to $20.2 million in the fourth quarter of the prior year. The Company's gross profit margin decreased to 32% in the first twelve months versus 34% in the same period last year. The gross profit margin decline was primarily attributable to the cost of conventional and organic milk, the Company's largest raw material. The total cost of milk was approximately 20 to 25% higher during the twelve-month period ended December 31, 2011 when compared to the same period in 2010.

Operating expenses as a percentage of net sales were approximately 25% during the twelve-month period ended December 31, 2011 compared to approximately 24% during the same period in 2010. Selling related expenses increased 34% or $2.6 million to $10.2 million during the twelve-month period ended December 31, 2011, from $7.6 million during the same period in 2010. This increase is directly attributable to the Company recording an approximate $0.7 million expense related its 25th Anniversary Cross Country Mobile tour, which occurred in the second quarter and was expensed during the second quarter of 2011. The Company views this as a non-recurring advertising expense.

Total net income was $2.9 million or $0.17 per share for the twelve-month period ended December 31, 2011 compared to $3.6 million or $0.22 per share in the same period in 2010.

Balance Sheet/Cash Flow Highlights
The Company had a net decrease in cash and cash equivalents of $2.1 million during the twelve-month period ended December 31, 2011 compared to a net increase in cash and cash equivalents of $2.6 million during the same period in 2010. The Company had cash and cash equivalents of $1.1 million as of December 31, 2011 compared to cash and cash equivalents of $3.2 million as of December 31, 2010.

Total stockholder's equity was $35.4 million as of December 31, 2011, which is an increase of $1.7 million when compared to December 31, 2010. This is primarily due the increase in retained earnings of $2.9 million when compared to December 31, 2010.

Dividend and Share Repurchase Program
The Company today also announced plans to initiate an annual dividend. Subject to declaration by the Board of Directors, the Company plans to initiate its first ever annual dividend sometime in the third quarter of fiscal 2012.

Additionally, on February 6, 2012 the Company's Board of Directors authorized a new share repurchase program for up to 200,000 shares. The new share repurchase program replaces the existing share repurchase authorization of 250,000 shares beginning in fiscal 2011 under which the Company repurchased approximately 130,000 shares.

Conference Call
The Company will host a conference call to discuss these results with additional comments and details. The conference call is scheduled to begin at 4:30 p.m. ET on Monday, April 2, 2012. The call will be broadcast live over the Internet hosted at the Investor Relations section of Lifeway Foods' website at lifeway.net, and will be archived online through April 16, 2012. In addition, listeners may dial 877-407-3982 in North America, and international listeners may dial 201-493-6780. Participants from the Company will be Julie Smolyansky, President and Chief Executive Officer, and Edward Smolyansky, Chief Financial Officer.

For more information about Lifeway Kefir, please visit lifewaykefir.com.
 

 

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